Cadence Bank(US:CADE)2024-04-23 22:38Financial Data and Key Metrics Changes - The company reported GAAP net income of $114.6 million or $0.62 per common share, with adjusted net income from continuing operations also at $114.4 million, reflecting significant improvement over previous quarters [135][131] - Net interest income increased by $19 million or 5.8% compared to the fourth quarter of 2023, totaling $354 million [140] - The net interest margin improved by 18 basis points to 3.22%, driven by a restructuring of the securities portfolio [137][19] - Adjusted expenses declined by over $6 million compared to the fourth quarter, contributing to a reduction in the adjusted efficiency ratio to 60.1% [128][145] Business Line Data and Key Metrics Changes - Service charge revenue increased by $7.2 million, primarily due to changes in deposit service charge fees [20] - Mortgage banking revenue saw notable increases in both production and servicing revenue, alongside a stable MSR asset valuation [20][144] - The company experienced a 4.8% annualized growth in loan balances, amounting to over $385 million, with significant growth in non-real estate and owner-occupied C&I portfolios [126] Market Data and Key Metrics Changes - Non-interest-bearing deposit balances ended the quarter at 23.1% of total deposits, slightly down from 24% in the previous quarter [142] - The total cost of deposits increased by 13 basis points to 2.45%, marking the slowest pace of increase since the onset of the current rate cycle [141] - The company strategically reduced brokered and certain thinly priced public fund balances, which collectively declined by over $1 billion linked-quarter [136] Company Strategy and Development Direction - The company continues to focus on improving operating efficiency and driving business development, as evidenced by the strategic initiatives completed in 2023 [125] - There is an ongoing effort to grow core customer deposits, with approximately $400 million in organic growth during the quarter [136] - The management expressed confidence in maintaining a stable credit quality while pursuing loan growth in high-growth markets such as Texas, Florida, and Georgia [172][173] Management's Comments on Operating Environment and Future Outlook - Management noted that the current operating environment remains competitive, particularly in the community banking sector [27] - The company anticipates further improvements in net interest income and margin stability, with expectations of continued loan growth [44][30] - Management highlighted the importance of ongoing investments in technology and personnel to support future growth [62][86] Other Important Information - The company repurchased over 650,000 shares at a weighted average price of $25.65 during the quarter [8][129] - The provision for credit losses was recorded at $22 million, with net charge-offs totaling $19.5 million, both in line with expectations [138] Q&A Session Summary Question: Can you discuss asset repricing and expected lifts in asset yields? - Management indicated that the most significant lift occurred from the fourth to the first quarter due to securities repositioning, with expectations for natural price lifts from balance sheet repricing [13] Question: What is the outlook for loan growth and pipeline? - Management reported a solid pipeline filling in February and March, with growth primarily in higher growth markets, particularly in corporate banking [37][172] Question: How are non-interest-bearing deposits trending? - The company expects a gradual decline in non-interest-bearing deposits to about 20% of total deposits by year-end, reflecting normal customer behavior [68][100] Question: What are the expectations for mortgage banking? - Management noted that while they are not focusing on refinancing, they are selling more loans than they are portfolioing, indicating a balanced approach [108] Question: Are there any sectors showing weakness in credit quality? - Management identified some stress in the senior assisted-living sector and noted migration in the SBA loan portfolio, but overall credit quality remains manageable [170][171]